Economist Sees More Growth, Low Inflation And Likely No Recession

A Federal Reserve Bank of Chicago adviser told Lake County Chamber of Commerce members Thursday that he believes the economy will continue growing in 2020, and he does not see an immediate threat of a recession.

Senior Economist and Economic Advisor William Strauss marked his 13th annual forecast luncheon at the DoubleTree Hilton Hotel in Mundelein. It will be his last because he will be retiring this year.

"Bill has been doing this for us since 2008," said Shaunese Teamer, executive director of the chamber, who presented him with a plaque for his "distinguished service" to the chamber.

Strauss began his talk with reviewing last year's predictions and he gave himself a B+ grade because he was "not too far off. And I'm a tough grader," he said as people laughed.

"In the middle of last year, we tied the record of 120 consecutive quarters of growth. We're now at 126. This is phenomenal growth performance," he said.

While we entered 2019 with concerns, there were many positives.

"It was a very decent year for growth," he said, and he thought it was remarkable the economy produced 2.1 million jobs, when normally it's about a million a year.

While the typical expansion lasts five years, he said many people foolishly said a recession was around the corner.

"But that's not how recessions happen," he said. "The tariffs and trade war talk did not put the country at risk for a recession because with a $20 trillion economy, it's got to be a large shock."

He also said that before the last recession different sectors, especially the housing market, were "going nuts. I don't see the other sectors going nuts.

"The change has to be big enough to make people alter their behavior," he said. The other economic indicators are flat, like the hours worked in manufacturing, which has not begun to fall.

"We're still growing, but not as strong as we typically like to see," he said.

The real gross domestic product looks good three years out with a 2- to 2.2-% growth rate for 2020. Unemployment is expected to stay below 4% for the next three years.

He said the Federal Reserve has been unable to get the 2% inflation rate they have sought, "but maybe 1.5% is the new target."

He addressed the criticism that many of the new jobs are way down on the economic ladder, but he said people have to start somewhere. He talked about Taco Bell managers making $100,000 a year after most likely working their way up through the system.

"We create all kinds of jobs. I don't think any job is a bad job. People are getting paid what they are worth," he said.

He said its unprecedented that the United States is now tied with Saudi Arabia as an oil producer, and it is tied with Russia in gas production. "For the first time since the '60s we exported more than we imported," he said.

On tariffs, he said we went from being one of the lowest countries for tariffs, to now being about middle of the road with everyone else. "Maybe that's a strategy (for this administration)," he said, wondering out loud if, now that we are as high as most others, the administration will try to get everyone to negotiate down.

He also said that all of President Donald Trump's tweets last year on tariffs made businesses "freeze" because they didn't know what was going to happen.

The Midwest economy has lagged a little behind the national economy, but part of that was due to the automaker strike that he called "a one-off event." He also said that while light vehicles are declining in sales, larger vehicles like SUVs and trucks were increasing.

He said sales have been moderate, but at profitable levels.

Strauss said he expects employment to rise a little, and unemployment to stay low. Inflation will be close to the target 2% through 2022. Housing will improve modestly, and vehicle sales will edge lower this year.